Economic Update 11th April 2012
Oil price impacts logistics
High oil prices are having a greater impact on the decision making processes of transport and logistics businesses than previously, according to Ti's current Global Logistics Monitor.
The Logistics Monitor reports first quarter economic growth in transport and logistics, but reports that operators are putting much greater effort into reducing transport costs.
At the same time the Ernst& Young ITEM Club has warned that a leap in the barrel price of oil from the current level of $120 to $150, could see petrol pump prices hit £1.60 a litre in the UK. This could push unemployment to 3 million, force inflation up, and herald a return to recession.
The ITEM Clubs says that changes in the barrel price of oil are largely driven by sentiment, so fears over the situation in the Middle East could spark such a price spike.
Takeovers likely in logistics
A rise in logistics sector takeover deals has been predicted by accountants KPMG with a boom in activity forecast across Europe.
The KPMG says that mid-sized and family run businesses are likely to appeal to buyers looking towards market consolidation, particularly as many of the transport operators that have survived the downturn are now cash-rich.
Private equity companies are flagged as being interested in niche operators specialising, for example, in carriage of dangerous goods, medicines, or perishables like fruit. Package delivery operators are said to be of particular interest to mainstream buyers.
However, with the targeted businesses likely to be cash-rich, it is unlikely that buyers will be able to force a sale.
Joblessness rise will last until autumn
Think tank, the Institute of Public Policy Research (IPPR) says that unemployment will continue to rise until September at the earliest, with 100,000 more people expected to lose their jobs over the summer. The IPPR says that the jobless total may not fall until late 2013.
The north-west and east of England, as well as London, Yorkshire and Humberside, are forecast to bear the biggest unemployment increases. There will be only a small rise in unemployment in the South East and east Midlands. But the IPPR forecast that the west Midlands, Northern Ireland and South West will see an improvement in the jobs market.
New agency worker rules avoided
Only a third of employers are complying with the letter and the spirit of the agency worker regulations that came into force in October 2011, according to a report by law firm Eversheds.
The rules seek to give temporary workers the same pay and other rights as permanent workers staff 12 weeks of employment.
But a survey by Eversheds has found that two-thirds of employers are lawfully avoiding giving temporary staff full rights by using legal loopholes.
In the logistics and supermarket sectors, businesses are asking recruitment agencies to employ staff directly so that the job agency becomes the temporary worker’s employer for the purposes of the law, even though the person is working at the logistics business or supermarket.
In other sectors businesses are relying more on the genuinely self employed, while others have cut starting salaries and benefits for all staff, so that temps are no better off after 12 weeks.
The Trades Union Congress said that it would consider complaining to the European Commission if avoidance of the rules was confirmed as widespread.
Interest rates stay at 0.5%
The Bank of England’s Monetary Policy Committee has yet again decided to keep UK interest rates at the record low of 0.5%.
Interest rates have remained at this level since March 2009 and many commentators expect the base rate to remain 0.5% for another year.
February fall in manufacturing output
Against a background of mainly positive news on the economy, come figures showing the largest monthly fall in factory output in 10 months.
UK manufacturing output fell by 1% in February according to the Office for National Statistics. This was counter to the predictions of analysts who had expected to see growth. The equivalent figures for January revised down at the same time.
Despite this news most commentators think that the UK economy will post modest growth in the first quarter of 2012.